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TELEGRAPH INTERVIEW: David Davis – “I make Tory leadership nervous”

David Davis is, in his own words, “intensely relaxed”. As we meet in Howden, an attractive market town nestled in the Yorkshire constituency he’s held since 1987, the Former Shadow Home Secretary and one-time Tory Leadership candidate certainly seems laid back.

Tieless, and with a beaming smile, Davis guides me to a delightful local pub for an unflashy lunch. Over scotch eggs and spicy chicken, the Tory backbencher Downing Street most fears launches into frank conversation.

“The Conservatives have just had a wake-up call with a baseball bat,” says the Former Minister for Europe. “What we’ve just seen was a very, very clear statement from a lot of people, half of whom previously voted Tory, that they’re not happy”.

The “wake-up call”, of course, was UKIP’s outright victory in last week’s European elections – chalking-up 27.5pc of the vote, ahead of Labour on 25.4pc and the Tories on 23.9pc, with the Liberal Democrats trailing on 6.9pc. Nigel Farage’s party also took 163 local council seats – more than tripling their tally, despite what Davis describes as an “anti-UKIP media onslaught”.

Farage is “rather admirable” and “clever” Davis insists, batting away claims the UKIP leader is racist. While “he could sometimes choose a better form of words”, Davis defends Farage’s right to put immigration at the centre of UKIP’s campaign.

“The simple truth, difficult for metropolitan politicians to understand, is that immigration is an issue,” he says. “To accuse people of racism because they’re trying to articulate an immigration policy is a very bad thing to do – I’ve been on the receiving end of that myself”.

Asked about David Cameron’s previous tactic of dubbing UKIP supporters “fruitcakes” and “loonies”, Davis says “it’s unwise to be rude about your potential voters”. Part of UKIP’s latest electoral surge, he says, derived from “anger at the media’s treatment of the party, which clearly backfired”.

Davis warns against the Tories joining UKIP in a pre-election pact, though. “UKIP couldn’t do a deal if they wanted to,” he says. “They’re a young party and takes years to develop the necessary discipline. It also strike me as unlikely UKIP would want a deal, given they present themselves as an anti-establishment party”.

The Conservatives’ fate now swings, says Davis, on its response to the “pretty fierce slap” just administered by the electorate. “How we do in next year’s general election depends, to a very large extent, on how we deal with the UKIP issue. We need to get UKIP support down from around 28pc to under 6pc. That’s the level at which we start losing three-way marginal seats, particularly in the North and Midlands, not because UKIP win Westminster seats outright, but because they bleed off enough votes to make us vulnerable”.

These latest election results, which saw Eurosceptic parties makes gains across many EU members, “create an opportunity for the UK” says Davis. In Cameron’s promised negotiation on EU membership, which the Prime Minister has pledged if the Tories win the May 2015 general election, “the UK can now make stronger demands of the European Commission than would otherwise have been possible,” Davis says, “with an improved chance of them happening”.

The Prime Minister should now be “laying out clear blue lines” on Europe, he says, “putting our demand on the table, right up front”. The first thing should be concessions on the free movement of people – “which need not be an absolute”. Davis suggests safeguards delaying emigration from newer EU member states until average wages exceed minimum wage levels in richer Western European nations.

More fundamentally, he calls for member states to have the power to opt-out of any European law to which national Parliaments object. “The single most important issue is an ever-lasting opt-out – not just for the UK, but across the EU,” says Davis. “It will be fought tooth and nail by Brussels but would be attractive to many mainstream politicians now feeling nervous”.

He predicts that if the UK “took a stand” during any re-negotiation, then other countries could support back us. “There may well be alliances to be had – with the Dutch, the Germans and maybe the Nordic states, which also have a sizeable Eurosceptic population”.

As things stand, or if the UK achieves only “an “inconsequential renegotiation” Davis declares he would “definitely” vote to leave the EU. “For me to stay in, the ever-lasting opt-out is an absolute fundamental minimal. Even then I’d want a lot more, in terms of freeing-up trade and regulation,” he says.

Dubious about EU membership, Davis reserves his most scornful words for the Commission’s attempts to save the euro. “They now face a choice of mad ideas – a single currency without a fiscal union, which can’t work, or a fiscal union of separate democracies, which can’t work”. Going further than he has before, the MP for Haltemprice and Howden warns the euro won’t survive in its current form. “I’m surprised no country has left yet, but am sure that will happen at some point”.

While he “firmly believes” Cameron will deliver on his promise of a referendum in 2017 if elected, Davis acknowledges “there are a fair number of people who don’t believe that, for various historic reasons”. The Prime Minister’s previous unfilled referendum promise, on the Lisbon Treaty, goes unspoken.

“Everything we do has to increase our credibility on this issue – which is I would bring the referendum forward to 2016,” Davis says, “not least to demonstrate a degree of purpose after these European elections”. Unless there is a “fundamental change” in the UK’s relationship with Europe, Davis predicts “the British public will vote to leave”.

Determined to see constitutional change in one area, this 65-year-old political street-fighter becomes misty-eyed when considering change in another. “I think the Scots will vote to stay in the Union [in the September 2014 referendum] but I fear it will be very close,” he says. “Calls for independence will then go on and on”.

Visibly moved, Davis talks about the prospect of the UK splitting up. “This debate hasn’t been emotional enough,” he says. “It’s been all about saying ‘you can’t have the pound’ and so on – all about money. Why does the UK have more reach, influence and power than any country of 60m ought to have? It’s largely because of the diversity of our nation, the Scots, the Welsh and the Irish, which has acted as a motor for growth and development”.

While losing the Scottish referendum would be “bloody humiliating for Cameron”, Davis doesn’t think the Prime Minister would need to resign. But we could see “mayhem” if the Scots vote to leave.

“We’d have a general election before the split had been negotiated. If the Tories lose, Miliband would be in charge with a set of Scottish MPs supporting his policies that wouldn’t be there in a year or two, as they’d have to be ejected. Where the hell would we be?”

Turning to the economy, Davis “welcomes” the recovery, but worries it is “too consumer driven” and that “UK exports remain very weak”. He is highly critical of the Bank of England’s repeated bouts of quantitative easing. “The first round was necessary but it then became more and more toxic,” he says. “The poison hasn’t started to work yet, in inflation terms, but it will”.

Help-to-buy, used to bolster the housing market, has been “well-intentioned but wrong-headed”, says Davis. “We should signal we’re phasing it out. But once you’re on the opium of QE and help-to-buy, getting off them is a problem”.

Davis seizes on a speech by Mark Carney this week, in which the Bank of England Governor claimed QE, while harming savers at the expense of borrowers, will still “benefit longer-term social mobility”.

“Carney is completely wrong, bonkers,” says Davis. “I don’t mind inequality, but I do mind inequality that’s perceived to be unfair. That’s a serious problem – made worse in spades by QE.

Warming to his theme, Davis calls for “deep structural reforms” of the UK banking sector. “The more I think about this, the more I want a Glass-Steagall split [of investment and commercial banking], he says. “The biggest influence on the political classes is the financial services industry that funds them – and that applies to all the main parties”.

Westminster has lately been buzzing with speculation Davis could return to government in the upcoming reshuffle – expected in July or September. Having grown-up in a council house, and with extensive business experience, many Tories backbenchers feel Davis could add some working-class grit to a government often accused of being remote.

“It’s not my call,” he says. “If I’m wanted back to do something useful, then fine. But the harsh truth is I don’t feel it’s going to happen”.

Arms outstretched, across the back of his pub bench, you get the feeling Davis yearns to return to front-line politics. “They find me awkward, I make them nervous,” he says of his party’s leadership. “Let’s see”. Then, the beaming smile again, as he drains his glass. “In the meantime, I’m as comfortable as can be”.